WASHINGTON – A new report by Taxpayers for Common Sense (TCS) finds that below market royalties in Utah have cost state and federal taxpayers $643 million in lost royalty revenue over the last decade. At the same time, if outdated federal financial assurance requirements return—like the Bureau of Land Management has recently proposed to do in a new rule—taxpayers could face approximately $559 million in unrecovered cleanup costs from currently producing wells in Utah.

The report, Utah’s Federal Oil and Gas Leasing, and what It Has Cost Taxpayers, finds that applying an 18.75 percent royalty rate to oil and gas produced from federal lands in Utah would have generated an additional $643 million in public revenue. Because roughly half of federal royalty revenue is returned to producing states, more than $321 million of that additional revenue would have flowed directly to Utah.

“Oil and gas produced and sold from federal lands belong to American taxpayers,” said Autumn Hanna, Vice President of Taxpayers for Common Sense. “Federal leasing policies determine how much of that value will stay with the taxpayers who own these resources. For decades, federal policy has answered that question by giving taxpayers less.”

The report’s key findings include:

• Federal taxpayers could have received an additional $643 million in royalty revenue if an 18.75 percent royalty rate had been applied to federal oil and gas production in Utah over the last decade.
• More than $321 million of that additional revenue could have returned to Utah, where federal mineral revenue supports schools, infrastructure, and other public priorities.
• Outdated federal bonding standards could leave taxpayers exposed to approximately $559 million in potential reclamation liabilities from currently producing wells.

Federal oil and gas operators are required to post bonds intended to cover the cost of plugging wells and reclaiming drilling sites. Under previous requirements, average bond coverage amounted to only a small fraction of likely cleanup costs—$3,873 in bond coverage per well, compared to an estimated reclamation cost of $71,000. When bond coverage falls short, taxpayers can be left to pay the difference.

In 2024 the Bureau of Land Management updated policies to better reflect real cleanup costs—better ensuring operators, not taxpayers, pay for reclamation. Now, the Administration is proposing to lower minimum financial assurance requirements back to the old, inadequate levels. The 8,327 producing federal oil and gas wells in Utah could cost roughly $591 million to clean up. But if average federal bond coverage returned to $3,873 per well, the government would hold only about $32 million in financial assurances, leaving taxpayers potentially responsible for the approximately $559 million difference.

“Cleanup costs do not disappear when bonding requirements are weakened,” said Hanna. “Instead, weak bonding requirements only raise the odds that taxpayers will inherit the bill when an operator walks away or goes bankrupt. It is a double hit for Utah taxpayers – federal policy shortchanges them on production revenue, then leaves them underinsured for the cleanup that follows.”

Congress updated federal oil and gas leasing terms in 2022, raising the minimum royalty rate for new onshore leases to 16.67 percent and strengthening other fiscal safeguards. In 2025, Congress reduced the royalty rate to 12.5 percent and restored noncompetitive leasing.

The report concludes that responsible oil and gas development and strong taxpayer protections, including higher royalty rates, are not in conflict. States including Texas and New Mexico charge royalty rates as high as 25 percent on state lands while maintaining substantial oil and gas production. And Utah’s own recent updates to bonding requirements for oil and gas operators on state land show a growing consensus that reasonable financial assurance requirements target bad actors while supporting responsible development.

“Lower royalty rates and outdated bonding requirements do not create more oil and gas,” said Hanna. “They simply reduce the public’s share of the value produced and risk saddling taxpayers with a hefty cleanup bill.”

Taxpayers for Common Sense is a nonpartisan budget watchdog serving as an independent voice for American taxpayers. TCS works to ensure that taxpayer dollars are spent responsibly and that government decisions are transparent, accountable, and grounded in the public interest.